When you hear about Black Friday, images of stampeding shoppers and parents wrestling over the last toy come to mind. "Jingle All the Way" starred Arnold Schwartzeneggar and is a cute, Hollywood classic, but real life scenarios (Walmart employee Jdimytai Damour was trampled to death in 2008) put the uglier spin on the beginning of the season that is supposed to represent "God Among Us" and the Christmas spirit best represented by giving to those less fortunate.
Alas, human nature is what it is and who can resist a $99 tablet, a $200 laptop or a $350 48-inch flat panel TV with wi-fi capability? Let's examine the economics of Black Friday.
When you are out shopping for others, you are probably creating economic inefficiencies. Twenty years ago when Grandma scored a "Tickle-Me-Elmo," the whole family treated her like a lottery winner. The truth is, she should have stood in Walmart parking lot and sold it to the highest bidder. The infant that received the gift was unimpressed. And when the infant grew old enough to appreciate he toy and play with it, the toy was passe and never held much appeal. In economic terms, Grandma was converting money to utility or "usefulness." The doll offered little to no utility. Thus, the purchase was inefficient. Of course, any gift would be inefficient to a 4-month old baby. Except cash. Cash has the ability to convert "present value goods and services into future value goods and services." That $20 used to purchase Elmo could have been invested and today would be worth $50. And the 4-month-brold, now in college, could find some usefulness out of the $50.
Black Friday (#BlackFridayMatters) has come to represent the mantra of American Consumerism... low prices. When I saw the 48-inch flat screen TV for $349 I began to think about TV prices in general. In the late 1990s we bought a TV for about that much. It was 23 inches and it took up a lot of space in our living room. We moved to a new house and created a built-in wall unit with room for a 55-inch LCD TV. It cost around $2000 but it was meant to last a lifetime. The bulbs were $200 to replace and I was never happy with it. A fuse went - known problem, according to a website - and the repair man cost $100 just to walk in the door. I chose the new alternative. Watch a video on YouTube, buy a $16 replacement fuse, and do it myself. The fact is, paying so much for a TV that had such high maintenance cost violates one of my own personal laws of utility.
So, when we sold the house and the new owners wanted the TV, we sold it. Our next TV purchase was a flat screen 42-inch, internet-ready TV for about $1000. I was thrilled. Cheaper. Lighter. Less space, since it hung on the wall.
Now, 5 years later, the price is one-third of what we paid. You certainly don't pay $200 for a light bulb or $100 for a service call on a TV that is replaceable for $349. That impacts your career choice is you wanted to be a TV repairman, but otherwise it's all upside. Lower prices means more consumer surplus for families that can afford a $1000 TV. They can buy a TV and still have $650 to buy other things.
Most importantly, it means that poor people can feel like they're living the middle class dream. It takes a week's worth of minimum wage work to buy a 48 inch TV that is internet ready (and just another hour of work per month to afford Netflix). Only 10 years ago, a TV that size cost a week wage from someone in the Top 5% of all US wage earners. Thankfully, the government didn't introduce a "TV subsidy program" to tax the rich and give grants to the poor to make TVs more affordable to low income families. If a politician did, prices would still be at $2000 or higher. And politicians would still be dividing the nation into the haves and the have-nots in the hope that the have-nots will be jealous enough to vote them into office.
With the free market, though, it's not clear that the have-nots will be voting in the upcoming election. They may be too busy watching Netflix on their 48-inch flat panel to care about punishing the rich.
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